Oct 01, 2024
The Ministry of Finance's Department of Economic Affairs has announced crucial updates to the Public Provident Fund (PPF) rules, effective from October 1, 2024. These changes, introduced via a circular on August 21, 2024, aim to address irregularities in small savings accounts, particularly those related to minors, multiple PPF accounts, and Non-Resident Indians (NRIs). Below are the key updates:
The interest rate for PPF accounts opened in the name of minors will now match that of a Post Office Savings Account (POSA) until the minor turns 18. Once the minor reaches adulthood, the standard PPF interest rate will apply.
The maturity period for PPF accounts for minors will now begin from the date the individual turns 18, instead of the date of account opening. This means the 15-year PPF tenure will start once the account holder becomes an adult.
New rules have been introduced for individuals holding multiple PPF accounts. Interest will now only be earned on the primary PPF account, provided the yearly deposits do not exceed the prescribed limit of ₹1.5 lakh.
If the primary account's balance is under the annual limit, the balance from a second account may be combined for interest calculation. Any deposits exceeding the limit will be returned without interest. Additional PPF accounts beyond the second will not earn any interest.
NRIs holding PPF accounts will face significant changes if they fail to submit Form H, which addresses their residency status. From October 1, 2024, NRIs who have not submitted this form will only receive interest at the POSA rate until September 30, 2024. After this date, no interest will be paid on the account.
Indian citizens who become NRIs while holding a PPF account must submit Form H to continue earning interest. Failing to declare their NRI status will result in the loss of interest earnings after September 30, 2024.
These updates aim to streamline account management, ensure compliance with small savings regulations, and promote transparency. For parents managing PPF accounts for minors, the interest rate change means they will receive lower returns until the child turns 18. The restriction on multiple PPF accounts ensures that tax benefits and interest earnings are not overstretched. For NRIs, it is crucial to declare their residency status to continue benefiting from their PPF savings.
While these changes may seem minor, they can significantly impact account holders, particularly those managing multiple accounts or PPFs for minors. NRIs must also stay vigilant about the new rules to avoid losing interest on their savings. These updates bring greater clarity and transparency to the management of the Public Provident Fund, aligning it with broader National Small Savings Scheme objectives.
For more details and personalized advice on how these changes may impact you, feel free to contact us. info@nucleusadvisors.in